Coverage: Bayer ups its offer to buy Monsanto

Bayer AG is willing to up its offer to acquire Monsanto Co. to $127.50 a share, and it’s apparently in advanced negotiations to acquire the U.S.-based seed company.

Adam Samson of the Financial Times had the news:

Germany’s Bayer said in a statement that “while key terms and conditions have not yet been agreed”, it would be willing to pay up to $127.50 a share for Monsanto, valuing its equity at $56bn.

Monsanto in July rejected a $125-a-share offer, adding up to about $64bn including $9bn of net debt, as “financially inadequate and insufficient to ensure deal certainty”, but noted at the time that it was open to continued negotiations. Monsanto could not immediately be reached for comment.

A tie-up would create the world’s biggest agrochemicals company and would be the latest large deal in the chemicals sector. Dow Chemical and DuPont are looking to close a complex merger by the end of the year, while China’s ChemChina is in the process of completing its buyout of Syngenta of Switzerland

A deal would mark the largest outbound takeover by a German company in 18 years. The wave of consolidation that has swept across the industry could result in more than 60 per cent of the global seeds and chemicals market being controlled by just a handful of companies.

Ludwig Burger and Greg Roumeliotis of Reuters notes that the industry has been consolidating:

Bayer’s bid was already the largest all-cash proposed takeover on record. A deal with Monsanto would give the German company a shot at grabbing the top spot in the fast-consolidating farm supplies industry.

ChemChina agreed earlier this year to buy Switzerland’s Syngenta for $43 billion, after the latter rejected takeover approaches from Monsanto. Dow Chemical Co and DuPont are forging a $130 billion merger, which is to be followed by a break-up into three businesses.

In July, Bayer raised its earlier offer of $122 per share to $125 to put Monsanto under pressure to engage further.

Monsanto subsequently turned down Bayer’s $125 a share offer, but said it was open to further talks with the German company, as well as other parties.

Reuters reported last month that Monsanto’s talks with Bayer were making progress, with the latter receiving some limited access to Bayer’s books.

Jacob Bunge of The Wall Street Journal focused on what the deal means for Bayer:

Executives of the pharmaceutical giant have said that acquiring Monsanto, the world’s largest supplier of crop seeds and genes, will create a global firm with a deep portfolio in pesticides, positioned to help farmers around the world produce food for a growing and more affluent population.

Werner Baumann, who took over as Bayer’s chief executive just weeks before launching what would be the aspirin maker’s biggest-ever acquisition, is pursuing the deal as rivals in the $100 billion global market for seeds and pesticides seal their own mergers. Mr. Baumann has faced pushback from some Bayer shareholders, however, who have worried about Bayer shifting focus away from its pharma division.
Monsanto has said it sees the virtues of combining its prowess in seeds with Bayer’s much broader range of pesticides, but Monsanto’s board in July unanimously rejected Bayer’s previous offer of $125 a share as too low and “insufficient to ensure deal certainty.” Analysts have said around $135 to $140 a share may be a more realistic price.

Bayer said Monday that there was no assurance a deal would be struck, and if one was, it would remain subject to regulatory approvals.